The downside of SIPA’s reform - Solomon Star News

The downside of SIPA’s reform

18 January 2016
Author 

As the result of recent very high tariff introduce by SIPA, our country may be plunged into economic chaos.  After some dwell time the ripple effects of ports charges together with the inevitable snowballing of costs upon goods will arrive at the trade store.  The shopper’s money will afford less and less and his/her standard of living will decline.

The cost of our exports will be expensive and may lose competitiveness in overseas markets.  This can potentially kill the commodities market of copra, cocoa, fish and oil palm.  This will deprive the country of foreign exchange and spike inflation.

In-country, the extreme upstream of the macro-economy is the inter-face of the Supply Chain.  This interface is the International Port, SIPA, the one and only entity in this country with the mandate to facilitate maritime international trade.  Tariffs charged at the port have, in large part, the controlling influence over livelihood of end consumers; their affordability and the enabling power of their earnings.  These tariffs together with Customs Duty (CD) and Goods and Sales Tax (GST) are the initial coatings to CIF prices of imported goods.  CIF is the cost of transportation of goods to the inter-face, expressed as Cost, Insurance and Freight. These combinations then snow ball through the chain of intermediary distributers together with their respective sales surcharges to ultimately impact the end user; the consumers, us.

By proportion, the lion’s share of these series of loading thus bloating retail prices is the constant introduced by SIPA’s tariff.  (For those who are mathematically inclined, imagine your graph rising at some gradient in the positive quadrant but that that graph does not origin at 0.00:0.00 which is the point of CIF, but some distance up the mantissa; representing SIPA’s tariff plus CD plus GST.  These latter two are expressed in percentage of CIF but tariffs are expressed as multipliers applied to weights or volumes of consignments).  The potential for disproportionate over bloating to advantage does exists therein.  This is why increasing tariff is not a simple process of jacking up of prices.  It must be studied commodity by commodity and be rationalised.  The claim by Leni and Yow that the tariff has not been increased since 1956 is not true. The tariffs have indeed been increasing to keep pace with the general economic environment every two years on average.  Only, the preferred terminology is RATIONALISATION because that was what the rates and figures were subject to; not pencil happy jacking of figures, devoid of rationale. 

The rationalised rates are done in corroboration with Central Bank of Solomon Islands, importers and the appropriate divisions of government ministries.  Yes, there were cross comparisons with other Pacific Ports and yes, SI Tariffs were lower than other Pacific Ports BUT that is because SI is operating in a different economic sphere (aptly referred to as the sovereign state of Solomon Islands) and any increase must be mindful of the countries obligations to provide affordable service to its citizens, right down to village level.

The Claim that Importers are over charging for Goods is not true.  The vast majority of importers are hardworking traders getting on by relying on volume but with minimal margins.  It is completely mischievous to accuse them of overcharging using sweeping statement and stereotyping.  The claim by port management of large margins charged by importers is unqualified and unproven.  This is the domain of the price control unit of ministry responsible for commerce.  A simple check through source documents and survey of common consumer commodities at retail outlets will reveal the truth.  In these days of boundless cyber highway and networking this exercise can take but minutes.  The obvious example is rice.  It is a fact that Solrice distributers on average do not charge more than 3% mark up.  SIPA must be transparent and reveal the mark-up it charges for the less than palatable commodity it had spent public funds on.

This country must give due credit and respect to contributions by the Chamber of Commerce affiliate companies, the Chinese Association and indeed the budding local entrepreneurs struggling to find their footings.

The Chamber is umbrella body representing the interest of all business houses in the Country.  Its mandate to safeguard fare trade and level playing field in business ventures and entrepreneurships is made difficult by diversities of individual natures of business but also the competitive edging within their own ranks.  It however provides an avenue for common voice and standard in ethics amongst adherents and proponents.  The Chamber is a compulsory partner in the entire business environment of Solomon Islands.  They have feelers and indicators for health of business and ongoing prospects within the business environment scope.  Their partnership and support is invaluable.  Their apprehensions, cautions and outright objections must be taken seriously.  Theirs is the practical ‘what goes where’ with ‘boots and ears on the ground’ role and their experiences are nearest the actual.  The sweeping statement issued by Yow that they should cut their margin and lower whole sale and retail prices demands evidence based qualification.

The Chinese Community had exerted a lot of push and pull factors to trade and economic development of the country.  Our envy of them must give way to studied emulation of the modus operandi displayed by the business acumen of the Chinese.

They do not rake muck in the midst of criticism and figure pointing but quietly go about trading and accumulating the little margins they make.  Patience, persistence and perseverance are inherent tools of trade for them.  Whatever riches they accumulate are through the motto they adhere to: ‘keep the cents and the dollars will look after themselves’.

This is coupled by the ‘live for principle’ all Chinese hold dear; ‘work to give the next generation a better life.’  The overactive bad mouthing by the outspoken at SIPA especially those wielded by Mr Yow may incite bad omen towards this sector of our community and may potentially result in hostility, especially taken in tandem with Yow’s back ground and his perceived role in inflicting harsh economic conditions which, without a doubt, will perpetuate themselves after some dwell time.

It is increasingly evident that indigenous are getting better and better at running successful businesses.  They deserve incentives and encouragement to continue to grow and prosper and that their numbers continue to be increase in the years ahead.  By and large within in this grouping is embedded the vast majority of resources and potential; latent and abundant in good measure.

The digressions into other business undertaking by SIPA such as the trade in rice, the proposed container freighting or bus transport are destruction to the core function of the port.  There are even rumours that SIPA is contemplating involvement in shipping and aviation.  This must not go unchallenged especially when the port is starved of essential infrastructure and equipment.  What about wharves, jetties, container yards, International Ships and Port Security, Green Port, Gearless Ships Preparedness, Unimpeded Ingress and Egress.

But for ships and yard operations, all the changes that have been introduced since 2014 have been ill-conceived and tailored for self-interest and gain.  Any inkling of good that may have been achieved would have been far out done by the exorbitant fees that were paid to the Singaporean consultants and the exorbitant terms of employment of the current CEO who happens to also have Singapore as his point of origin.  The stereotype that anything port-related has its forte in Singapore because of the exceptional success of Singapore Ports Authority is mischievous.  Singapore is strategically located, created and located by God at a spot of natural convergence of trade.  Her success is a combination of many factors, not least of all a place of refuge and safe haven for near-marginalised down and outs who found solace under an over protective but power wielding leader.  The combination of circumstances worked for them.  Ours is a different combination of circumstance, NOT stereotypical with that of Singapore.  The grey matter, (which term refers to the human brain and its motor neurons), is grey, irrespective of pigment of skin.  Capabilities are measured by aptitude, attitude, learning, motivation, drive and resilience.  Magnitude and versatility of capabilities transcend all categories of humans.  The same that exist in Singapore can be found here at home.  Where is the sensibility of transposing Singapore to Solomon Islands?  Knowledge and technology transcend boundaries of nations but physicality is inherent and modus operandi is an evolution steered by circumstances.  The brain is here, latent in good measure.  On the ground familiarity and experience is irreplaceable and unmatchable in advantage.  Why SIPA should spend good money on a total of nine Singaporean consultants defies common sense.  It is fraudulent expenditure of foreign exchange.

It must be quite clear in the minds of all Solomon Islanders that we headed for economic chaos.  We are sitting ducks in our own country, innocently ignorant.  And they continue to keep us in the dark and feed us with rubbish.  We must stand up and be counted.  The so called reforms that were introduced were no ‘rocket sciences’.  SIPA was easing through them via other less expensive routes before the untimely intrusion by the Board of Nollen Leni.  Reforms were supposed to be honed and refined after completion of the new wharf and container terminal now under construction.  Why this was pre-empted is the million dollar question.

Nollen Leni had time and time again written to this paper to trumpet self-grandiosities for his Board and Management.  They have obviously believed they have done the right things.  This self-image is very dangerous.  When people do the wrong things without realising they have done wrong then they may have what is psychologically referred to as cognition impairment.  They have been feeding the public with half-truths, misinformation, and outright falsehoods.  They succeeded in fooling themselves and the public of Solomon Islands.  One adage rings out loud and clear at this time: YOU CAN FOOL SOME OF THE PEOPLE SOME OF THE TIME BUT YOU CANNOT FOOL ALL OF THE PEOPLE ALL OF THE TIME.  Your every decision will henceforth come under scrutiny and analysis.  True, you have the vested authority to make decisions but those decisions must be knowledge based and backed by experience.  You overlooked the principle of ‘core competence’ and supposed that all was what they seemed to be.  No!  Operating an international port is a knowledge based undertaking.  Your lack of knowledge and competence is conspicuous in all the mess SIPA is wading through at the present time.

There is massive financial mismanagement and outright fraud that is becoming all too apparent.  There is gross disrespect for human right of Solomon Islanders in their own country.  There is rampant self-service to resources and properties of SIPA by the Board and top management.  If and when a new Board is in place it will be quite befitting that they engage and instant Financial Audit and a Corporate Audit to ascertain the authenticity and wisdom of business dealings within the last four years.  These audits must be bench marked against standards that currently in place for the organisation and it financial guide lines.

The most recent very big lie to the public is the payment of $10,000,000.00 to government.  This was supposed to be money earned by the ports within the eight months Collin Yow was in post as the result of the reforms he introduced.  The information was released to a paid for captive audience and orchestrated to the mass media on the first week of October 2015, a mere several days after 30th September, the end of SIPA’s Financial Year.  The truth of the matter is that at the end of Financial Year the accounts for the fiscal year are closed, consolidated, adjusted and handed over to the external auditor for checking and authentications.  Upon completion of this process the Board must sit to accept the audited accounts before submitting them to the Office of the Auditor General for checking and vetting.  The Auditor General on being satisfied writes a letter of acceptance stating that to the best of his/her knowledge the accounts as presented are the true reflection of the Accounts of the Year Ending September 30th 2015.  This process may take up to eighteen months; i.e. it could only be possible in early 2017.  Any statement release to the effect of declared profit and dividends can only hold true after this due process.
 
These are not reforms but mammoth scale lies and experimentation.  Those in the position to make decision have been blind folded and mislead by second and third level agendas that, as it is now all too obvious, have only themselves as beneficiaries.  The Board of Nollen Leni has prided themselves in introducing reforms and changing the port for better.  They claimed that the reforms will be painful.  This is completely incompatible with modern management principles.  Good management ensures that changes are sensitive to good governance principles and allow for psychological phasing; they must be gradual and seamless.  The introduction of change must be sold to employees, port users and the hinterland at large with tact and logical persuasion, NOT force-fed.  Conversion of the mind allows all stake holders to take ownership of changes and to embrace them so as to ultimately realise that the end game is in keeping with the game changer.  As it is now apparent, the changes that SIPA has introduced are meeting with resistance.  The few confused individuals that have publically expressed support do not understand the nuance of the entire issue.  It is not all as it seems.


By William Barile
Former CEO SIPA

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